Bonds Up, Dow Up, JPY Up, Gold Up, Oil Up; Earnings Down, Macro Down

Tyler Durden's picture

For the fifth week in a row, US Macro data deteriorated markedly (not helped at all by today's GDP miss). The Q1 earnings picture is dismal, with beats far less than average and revenues hugely disappointing. But, in light of all that reality, where-ever you look, screens are green. Despite some softness today (oil, S&P, and Nasdaq down) the week showed impressive gains for equities amid the lowest volume week in three months (mostly driven by the epic short squeeze on Tuesday), modest gains for Treasuries (yields lower by 2-4bps), significant outperformance by precious metals (up over 3-4% on the week - having given some back in a post-Europe smackdown today), and WTI crude up over 5% on the week.  Perhaps the most notable fact about the week (apart from equity's inexorable bid in the face of nothing positive at all) was the surge in JPY. In an Abenomics-shattering print, last night's deflation data helped USDJPY rally its most in 11 months for the week. While all asunder will be celebrating another green week, it is perhaps worth noting that while the Russell gained 1.3% from Monday's close, the 'most-shorted' names of that index more than tripled that performance - gaining 4.4% on the week... squeeeeze.


The epic short squeeze that was this week...

Though it seems like the main squeeze was mid week and today saw shorts trading in line - which explains the 'market' need to sell every rally above VWAP (amid a dismally low volume week in the futures)...


With USDJPY having its biggest rally in 11 months!


Stocks gained still (despite JPY carry weakness)


But bonds were well bid...


The USD ended the week modestly lower even though EUR weakened against it. Driven by JPY strength and a huge surge in GBP after it avoided a triple dip (for now)...


and commodities all surged on the week - despite the slam down at the end of the European session today...


Still a believer... this week was the lowest volume month for eMini futures volume in 3 months...


Charts: Bloomberg and Capital Context

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88888's picture

Did anyone see the bloomberg interview with ron paul on gold. always interesting.

Dollar Bill Hiccup's picture

Like a tube of toothpaste.

Smile everyone!

css1971's picture

GBP economy.

+0.3% ... Roaring the three lions are.


I note they didn't print any error estimates with it.

Smuckers's picture

Someone HAARP Yellowstone National Park and lets dance.

Whoa Dammit's picture

FYI to anyone with Dish Network stock--the customer login for its Blockbuster website has been down since last Sunday.Not good for churn numbers or future earnings.

I could not find a news source to quote, so I had to link their facebook page (sorry for that).

LawsofPhysics's picture

Moar QE!!  This is insane.  Hedge accordingly.

McMolotov's picture

Bonds Up, Dow Up, JPY Up, Gold Up, Oil Up...

Bullshit way up...

DeadFred's picture

VIX flat, DOW transorts flat, copper down 2%. No reason to give up our "the end is near" case.

The Dancer's picture

Someone has taken a serious dislike for Amazon...down almost 8% on the day...

SilverMaples's picture

That's the new fed QE plan, short squeeze all the SPX short terrorists ... a.k.a the Icahn's way.

NotApplicable's picture

Who needs to outlaw shorts when you can apply infinite leverage against them? Will be interesting to watch the "market" once they succeed in making them all cover.

The Dancer's picture

Truly, shorts are viewed as such! Beware!

rsnoble's picture

In regards to the title of this shit it's friday.  Be happy. Go spend what $ you don't have this weekend.

polo007's picture

According to Bank of America Merrill Lynch:

Macro viewpoint

Easy in, easy out

- Review: The choppy slowdown continued into April, with better jobless claims but weak regional manufacturing surveys.

- Preview: The April employment report will be a good test of whether the March weakness was a fluke or a sign of sustained weakness. We look for a sub-consensus 125,000 increase.

- Hot topic: With persistently sub-2% inflation, the case for continued QE is building. When the Fed does finally head for the exit, the key question for investors is the same as it has been in the past: if inflation is low, it will be a soft landing; if inflation is high, buckle your seatbelts.

PontifexMaximus's picture

That will be the / our CB driven future for the years ahead: missing macros, matching northbound markets.

polo007's picture

The Bureau of Economic Analysis (BEA) announced new methods of calculating Gross Domestic Product (GDP) that will immediately make the economy "bigger' than it used to be. The changes focus heavily on how money spent on research and development (R&D) and the production of "intangible" assets like movies, music, and television programs will be accounted for. Declaring such expenditures to be "investments" will immediately increase U.S. GDP by about three percent. Such an upgrade would immediately increase the theoretic size of the U.S economy and may well lead to the perception of faster growth. In reality these smoke and mirror alterations are no different from changes made to the inflation and unemployment yardsticks that for years have convinced Americans that the economy is better than it actually is.

In essence, the new methodology is an exercise in double accounting. For instance, suppose a company employs an accountant who works in the sales department, who is then transferred to the R&D department at the same salary. He still counts beans but now his salary will be billed to the R&D budget rather than sales. In the old methodology, the accountant's impact on GDP would come only from the personal consumption that his salary allows. Going forward, he will add to GDP in two ways: from his personal consumption and his salary's addition to his company's R&D budget. The same formula would apply to a trucker who switches from a freight company to a movie production company (for the same salary). If he moves refrigerators, he only adds to GDP through his personal spending, but if he hauls movie lights, his contribution to GDP is doubled. It makes no difference if the movie bombs.

These double shots are different from traditional investments, which inject savings (or idle cash) back into the marketplace. Until money from personal or corporate savings is invested, it is not adding to GDP.

Another change that will artificially boost GDP concerns how government salaries will be counted. Unlike most private sector compensation, wages, salaries, and pension contributions paid to government workers are added directly to GDP. This distinction makes sense and eliminates potentially double accounting. Profits generated by private companies add to GDP when they are ultimately spent or invested by the company. Wages reduce profits, and therefore reduce GDP. But that reduction is cancelled out by the consumption of the employee receiving the wages. Governments do not generate profits, so salaries are the only way that public spending adds back to GDP.

The new system magnifies the GDP impact of government pensions, which are a principal component of public sector compensation. Going forward, the pensions will be calculated not from actual contributions, but from what governments have promised. Under the old system, if a state had a $10,000 pension obligation but only contributed $1,000, only the $1,000 would be added to GDP. Under the new system the entire $10,000 would be counted. So now governments can magically grow the economy simply by making promises they can't keep.

The bottom line is that now certain private sector salaries (in R&D and entertainment) will be counted twice and public pension contributions will be counted even if they aren't made. The economy will not actually be any larger or grow any faster, but the statistics will claim otherwise. With the stroke of a pen, our debt to GDP ratio will come down. Will this soothe the fears of our creditors? Will critics of big government take comfort that spending as a share of GDP may be lower? My guess is that the government is confident that its trick will work, and that distracting attention with a statistical illusion is the sole motivation for the change.

polo007's picture

An April 12 article in the Washington Post highlighted recent research that indicates a one-percentage point increase in unemployment makes us feel four times as bad as a one-percentage point increase in inflation. This is not particularly surprising, at some level, although I greatly suspect that the results are non-linear - but I am not shocked that it feels worse to see people lose their jobs (or to lose one's own job) than to absorb slightly higher price increases.

But the article goes on to argue that "Such findings could have significant implications for monetary policy, which until the most recent recession has primarily been concerned with controlling inflation. But now some central banks are speaking of allowing inflation to rise or stay slightly above their usual targets in hopes of bringing down unemployment." The idea the article is proposing is that it is incorrect to balance evenly the (inherently conflicting) mandates the Fed is tasked with to seek lower inflation and lower unemployment; they should favor, according to this argument, lower unemployment.

There are several flaws in this argument, but I believe it is likely that the Fed more or less agrees with the sentiment.

One flaw is that the damage to inflation comes in the compounding. If unemployment is 6% now and 6% next year, there has been no change. But if inflation is 6% this year and 6% next year, then prices are up 12.4%. And if it's for three years, it's 19.1%. How many years of that 1% compounding inflation do you trade for 1% incremental change in unemployment?

A bigger flaw, in my view, is that central banks don't have any important control over the unemployment rate, while they have important control over inflation. It may also be the case that a 1% rise in background radiation levels makes people feel even worse than a 1% rise in unemployment, but that doesn't mean the Fed should target radiation levels!

Moreover, even if you think the Fed can affect growth, it is still true that for big moves in these numbers (because we really don't care so much about 1% inflation change or 1% unemployment change, after all) the central bank's power to cause harm is clearly much larger in inflation. It is possible to get 101% inflation, and in fact many central banks have done so. No central bank has ever managed to produce 101% unemployment.

I doubt that commodities and breakevens will go higher in a straight line from here. And every time there is a break lower, the deflationists will call for the surrender of the monetarists. But I do wonder if this latest break is the worst we will see until there is at least some sign that QE is going to end.

disabledvet's picture

my theme song for this trading year so far is...(drum roll)...

disabledvet's picture

here's some video in case you "want in" on this years action...

disabledvet's picture

pretty sure it's a plymouth ... my bad...Dodge Charger. i was thinking Hemi Cuda.